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| WDR e-Brief No. 04 |
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| Wednesday, 03 April 2002 | |
In this e-Brief* Q&A: Do regulation and public policy inhibit progress? * New WDR Discussion Paper – Rationales for convergence and multisector regulation * Shared infrastructure – End of a nightmare? * Other news: - / WDR Discussion Paper on the agenda at EURO CPR - / Access regulation in digital television discussed at EURO CPR - / Energy Utility Views on Multisector Regulation - / LIRNE course in April - / EI Conference: Shaping infrastructure markets Subscribing and unsubscribing The WDR  No. 04, 3 April 2002 Welcome to the fourth issue of the WDR e-Brief, a bi-weekly bulletin from the World Dialogue on Regulation for Network Economies (WDR). The e-Brief is designed to help you keep informed of new documents and ongoing discussions on our website at http://www.regulateonline.org/ and of other WDR activities as well as other information of interest to the regulatory community. For more information on any of the items discussed here, go to the web addresses provided. Q&A: Do regulation and public policy inhibit progress? In each WDR e-Brief we feature a question or comment posted to the Online Dialogue at http://www.regulateonline.org/dialogue/ and ask our research teams to comment. The featured comment in this e-Brief was posted in the forum on WDR’s Framework and Objectives by Malcolm Matson of National Telecable Ltd. In the United Kingdom. http://www.comunica.org/w-agora/index.php?bn=wdr_framework. The answer comes from Professor William Melody, managing director of WDR. Question: In his comment Malcolm Matson wrote that “regulation and public policy are one of the greatest inhibitors to the rapid advance [toward the digital world] – not because of some perverse evil intent of beaurocrats, but rather because of the powerful voice of vested interests who will expend incredible effort to ‘make tomorrow as close as possible to yesterday’”. “When technologies of discontinuity are thrown up by the market (e.g. optical fibre transmission media and the digital computer ) it is IMPERATIVE that they are allowed to "destroy" today's vested interests as much as to be deployed by them.” However, according to Matson, regulation has done the opposite, “it has invested "yesterday's" licensed telecoms industry and the cartel of suppliers and consultants etc. with the exclusive right to deliver "tomorrow's" digital infrastructure.” He sums up his views with the statement, “I am increasingly of the view that the ‘new world’ we are entering upon maybe does NOT require any great body of special regulation but rather a firm rule of law and private property rights coupled with a political understanding that the new infrastructure needs some measure of LOCAL democratic control and accountability - as did the highways of the industrial revolution.” Read Matson’s complete comments and a paper he wrote on the subject at: http://www.comunica.org/w-agora/index.php?bn=wdr_framework Answer: Malcolm Mason doesn’t pull any punches in his critique of regulation, and expresses a view commonly heard from some members of the Internet community. Moreover, one doesn't have to look far to find cases where government regulations have functioned, and are functioning to protect vested interests from competition from new technologies and services. But one can also find cases where regulation has been the instrument to open markets to new technologies and competitors, against the power of monopoly vested interests. We should recall that the period over which Mr. Mason has observed "protective government regulation" has been primarily one where the generally accepted government policy for telecommunication was the preservation of national monopolies. The PTTs were viewed as "natural monopolies". Regulation was being implemented to achieve a clear policy objective. In contrast, the new telecom regulation is being implemented by new telecom regulatory authorities that have been established with a clear policy mandate to promote competition and the introduction of new technologies. Without regulation of interconnection to the networks of incumbent operators, the explosion of competitive cellular mobile services would not have been possible. Without the regulatory requirement that value-added telecom services be unbundled from the supply of telecom facility networks, the Internet could not have developed as it did. Regulation by an authority specifically designed to be independent from the day to day influence of politicians and powerful industry operators, and given a specific mandate to promote competition and new technologies, is significantly different from regulation by old style PTTs which had both a vested interest and a policy mandate to protect the monopoly. We must recognize that there are different objectives, structures and methods of regulation. Regulation can be an instrument either to prevent or promote change. The new telecom regulation is supposed to be the latter. It is perhaps a bit premature to condemn it in light of experience drawn primarily from the old school of protective regulation. Yet we must recognize Mr. Mason’s additional concern about the effectiveness of regulation, even if it has been empowered by new progressive policies. There is no guarantee that the new model of pro-competitive regulation by independent regulators will be effective. Independent regulatory agencies are subject to capture by powerful corporate or political special interests. With the advantage of hindsight, most observers have concluded that the UK regulator, Oftel, was influenced far too much by British Telecom in its early days. But Oftel learned from its early experience and became more independent during the 1990s. Many developing countries have gone through, or are going through a similar learning experience. In the US, which has had independent regulatory agencies at the state level for about a century, and at the federal level for about 80 years, there have been periods of regulatory capture of various authorities by incumbent monopolies. But it was also the US Federal Communications Commission (FCC) that initiated the regulatory changes introducing competition in new technologies and services, against the massive resistance of AT&T, including the first Computer Inquiry in 1966. In many countries undergoing telecom reform, the new regulatory agencies have had a major problem establishing their independence and credibility in the face of powerful incumbent operators resisting reform. Yet by now the evidence is unmistakably clear that in the network utility industries with powerful incumbent former monopoly operators, without regulation most opportunities for new technologies and services provided by competitors will be foreclosed. The challenge is to design and implement regulation that works effectively to achieve its objectives. In the very dynamic field of information and communication, there is an additional concern that technologies and markets are changing so rapidly that policy and regulation will not be able to keep up with the pace of change, let alone anticipate and lead developments. Yet if regulation is going to fulfil its dynamic mandate of establishing the regulatory foundations for 21st century network economies, there must be continuing special attention to the design, structure, capabilities and adaptability of the new telecom regulatory agencies. This World Dialogue on Regulation (WDR) project is contributing to that objective. We hope to significantly increase the chances that the new regulation will succeed in most countries. But we need to be constantly mindful of Mr. Mason’s healthy scepticism. There is no guarantee of success in this venture. Follow the dialogue post a question or make a comment at http://www.regulateonline.org/dialogue/ . New WDR Discussion Paper – Rationales for convergence and multisector regulation WDR's fourth discussion paper, "Rationales for Convergence and Multisector Regulation" has been posted on our website. Drafted by Rohan Samarajiva and Anders Henten, the paper critically examines the multiple rationales for ICT and media convergence regulation and multisector utility regulation. With regard to ICT and media convergence, the paper focuses on the policy and regulatory issues raised by convergence developments at the technical and market levels (convergence regulation), while in the case of multisector regulation, the paper emphasizes the institutional aspects (regulatory convergence). Download the paper at: http://www.regulateonline.org/dp/dp0204.htm Shared infrastructure – End of a nightmare? Opening up streets in the capitals and major cities in Europe has become a nightmare for all stakeholders. In a contribution to the dialogue on WDR Framework and Objectives, Walter Lemstra of Industry Insights (The Netherlands) reported on a couple of interesting European initiatives that seek to limit the disruption to city life caused by multiple service providers digging up streets to install multiple optical fibre infrastructures. By having the fibre installed by a neutral party and leased to service providers, it may be possible to both encourage competition, and minimize traffic interruptions. See Lemstra’s article in the WDR Framework and Objectives dialogue. You can also download a PowerPoint presentation on the subject that was given by David Cleevely of Analysys (UK) at the EICTA conference Broadband Europe: Call for Action, that took place in Brussels in March. http://www.comunica.org/w-agora/index.php?bn=wdr_framework Other News: WDR Discussion Paper on the agenda at EURO CPR A paper entitled “Rationales for convergence and multi-sector regulation” was presented by WDR researchers Rohan Samarajiva and Anders Henten at the 16th annual European Communications Policy Research (EURO CPR) conference in Barcelona March 24-26. The participants of the session showed considerable interest in the issues covered by the paper which was a synthesis and development of the two main discussion papers currently on the WDR website. The session was chaired by Professor Jens Arnbak, Chairman of the Netherlands regulatory agency for post and telecom OPTA. Mr Bernard Clements of the Institute for Prospective Technological Studies (IPTS) in Seville, served as discussant. A report of the discussion is available on the WDR site at: http://www.regulateonline.org/news/eurocpr.htm The discussion paper is available at: http://www.regulateonline.org/dp/dp0204.htm The EURO CPR 2002 conference programme is at: http://www.encip.org/static/EUROCPR/programme_eurocpr2002.html Access regulation in digital television Another session at the European Communications Policy Research (EURO CPR) conference in Barcelona March 24-26 dealt with access regulation in digital television – a theme which is highly relevant in relation to WDR’s discussion on convergence regulation. Papers by Natali Helberger and by Hernan Galperin and Francois Bar looked at US and European regulatory approaches to digital television access. A report on the session by Anders Henten, WDR ICT Convergence team leader, is available at: http://www.reguateonline.org/news/eurocpr.htm#digitaltv Energy Utility Views on Multisector Regulation At the Western Energy Institute Symposium in Vancouver, Canada, 17-19 March, WDR managing director Bill Melody discussed Multisector Regulation with executives from US and Canadian electric and gas utilities. They pointed out that, in their experience, US state public utility commissions treat electricity and gas in a reasonably integrated fashion, but that there is little evidence of integrated treatment between energy and telecom utilities. This extends even to basic issues such co-ordination of rights of way. Participants at the symposium agreed that the development of energy/telecom multisector utilities may stimulate greater coordination across the sectors, but there were mixed assessments over whether it would be likely to improve the efficiency or effectiveness of regulation. Western Energy Institute http://www.powerin.org/ LIRNE.NET training course to be given on new EU directives Registration is open for LIRNE’s next course, "The Next Step in European Telecom Reform: Assessing the New EU Directives". April 28 to May 3 in Helsingør, Denmark. Since its 1987 Green Paper, which began the process of telecom reform in Europe, the European Commission has been issuing telecom directives periodically on specific liberalization policy and regulation issues. After an extensive review of progress, and a new EU commitment to become the world's most "competitive and dynamic knowledge-based economy", the EC recently has issued a comprehensive "Telecom package" of new directives. They encompass a new Framework Directive and specific directives relating to, Access and Interconnection, Authorization (licensing), Universal Service, Data Protection, and a consolidation of existing "liberalization" directives. In addition, the EC has issued a regulation on unbundled access to the local loop and a proposal for a common EU spectrum policy. This course will examine the new directives in light of the performance of the European telecom sector, the ambitious objectives established at the 2000 EU Lisbon summit, and the challenges of implementation, where the national telecom regulators will have to play a key role. This will bring the WDR issues of convergence regulation to the forefront for discussions led by leading representatitives from the EC, National Regulatory Authorities, the telecom industry, user groups and academia. For more information on the course: http://www.lirne.net/training/helsingoer2002/ Shaping markets in infrastructure industries to be theme of 5th annual EI Conference The 5th annual conference of Delft University of Technology’s Economics of Infrastructures Section (EI) will be titled Regulation: Shaping Markets in Liberalized Infrastructure Industries for Better Performance. Since the early 1980s, all over the world, infrastructure industries have been increasingly exposed to the ‘dynamism of the market’. The common wisdom is that the liberalization of therse publicly regulated economic sectors stimulates technological innovation and produces cheaper and better services and higher system performance. Gradually it is also becoming clear that shifts in governance structures have a fundamental impact upon the economic, the organizational and the technical performance of network industries. This conference will explore the ways that different types of regulation shape infrastructure industries. For further information see the conference website: http://www.ei.tbm.tudelft.nl/Seminars/Conference%2030-31%20Mei.htm Questions and support If you have questions about WDR, send them to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it For technical matters, contact us at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or see the Frequently Asked Questions section in the Online Dialogue. http://www.regulateonline.org/dialogue/ Subscribing and unsubscribing The WDR e-Brief is a bi-weekly bulletin from the World Dialogue on Regulation for Network Economies <http://www.regulateonline.org>. Subscribe from the site or by sending a message to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it with the subject wdr e-brief list . To unsubscribe, send a message to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Bruce Girard < This e-mail address is being protected from spam bots, you need JavaScript enabled to view it >edits the e-Brief with assistance from Divakar Goswami. Archives: http://www.comunica.org/w-agora/index.php?bn=wdr_ebrief The purpose of the World Dialogue on Regulation is to critically examine ideas and evidence. Unless otherwise indicated, the views expressed in content appearing on the WDR website, the Online Dialogue and the WDR e-Brief are the personal views of the individuals submitting them. Content does necessarily reflect the views of LIRNE.NET, infoDev, the World Bank, the International Telecommunication Union or any other organisation associated with the World Dialogue on Regulation. World Dialogue on Regulation c/o LIRNE.NET Technical University of Denmark Center for Tele-Information, Building 371 2800 Kgs. 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